From Paper Debits to Digital: The Past, Present and Future of Banking

Bank

In preceding decades, people were “born into” a banking relationship. They very likely followed their parents and used the same local bank for their mortgage, checking account, and maybe even their investment portfolio. The bank branch was a staple in their weekly routine as a place to deposit or withdraw cash and manage various other financial transactions. Over the years that model shifted. Consumers no longer need to live within just one institution, they can keep a checking account at one bank while going online to get a mortgage from another company. Online banks that didn’t have any physical presence emerged and people became comfortable with 24/7 banking through mobile devices. But just 15 years ago, that didn’t exist. Despite this expanded choice, the actual processes involved with managing banking remain clumsy and at times archaic. So, where is banking headed? Here are some thoughts on the current and future state of the financial services sector, specifically the transformative impact of mobile technology.

Mobile Expectations Driving Change

From the consumer’s perspective, they have become accustomed to a responsive world. They have a wealth of instant, personalized and dynamic information at their fingertips, from real-time driving directions to the latest news. From search to e-commerce, every function on a mobile device is designed for the optimal user experience. Speed and ease of use are of paramount importance. The financial industry is playing catch-up. Banking and financial services started with technology that simply digitized traditional transactions and processes. But now, the industry needs a mobile-first strategy that recognizes the expectations of the modern consumer. These firms must adjust to the modern consumer that only asks for in-person help when absolutely necessary, expecting an ever-increasing range of functions through mobile.

Getting the Technology Right

Mobile is currently driving many branches to close, but there is still a demand for human connection. Banks that are handling this change well are leveraging the massive amounts of data now at their disposal. They’re transitioning to a model where the mobile device is the main conduit for transactions, information gathering, and personalized experiences. A mobile-first strategy means financial institutions can reduce their operational costs and present enhancements and new features immediately to the customers. With mobile as the main platform, they can coordinate messages either to specific customers or large segments. They’ll also gain access to rich user data, which they can analyze and then adjust the applications to create a better customer experience and also identify new potential revenue sources. Using the right technology infrastructure also benefits the security of the application. Consumers demand better security, so firms are challenged in building infrastructures with higher standards. The number of intrusions continues to rise, so startups in this space must fortify their infrastructure at the beginning to ensure data is not at risk.

The Future Approach

A key advantage for new players in the financial sector is the ability to develop infrastructure from a blank page. They don’t need to work on integrations with legacy systems or develop ways to pull information from multiple streams. Newer firms have a head start on customer experience because they’re already living within a mobile world. Instead of building a “bank-centric” architecture where the bank benefits and customers are at the periphery, startups can develop infrastructure that’s truly customer-centric. Unfortunately, many of the changes brought by digitization are cosmetic, they don’t address the need for improving the UI. Firms should question how their apps can anticipate the customer’s needs and then dynamically adjust to those needs and patterns. Financial firms should aspire for their apps to become habitual, so they’re essential for the user to successfully navigate any given day.

Some changes are already occurring within traditional banking and financial services. For example, bank tellers are retrained to present an interactive experience rather than a transactional one. They’re guiding customers to the in-branch ATMs while providing them with opportunities to talk with someone about investments or other more complex transactions. Firms are also expanding the capabilities of ATM machines by enabling them to handle transfers or make certain payments. Banks will need to broaden these efforts if they want to continue to operate physical stores to complement mobile.

Overall, there’s a considerable appetite for change from consumers. They want seamless banking and financial experiences that match and reward their lifestyle choices and that work well across geographic or merchant barriers. They desire more rewards and purchasing options such as instant installment payments that are available within an open borderless ecosystem. Banking and financial services need seamless integration into the consumers’ daily lives at the exact point of delivery. That’s what is missing. Banking remains a silo of life around us, but startup firms that are challenging that dynamic are making sure services are delivered to people right now through mobile.

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